One of the first decisions you will make when selecting car insurance is the amount of your deductible. The deductible is the amount of money you must pay out of your own pocket toward the cost of a claim. Obviously, a lower deductible is more convenient, but it comes at a price. Choose a deductible that is too high, however, and you might find yourself in a financial bind after an accident. If you are unsure how much to choose for your own deductible, continue reading to find our quick and easy guide to car insurance deductible math.
What is a Deductible?
The deductible is your financial responsibility for a covered claim. If for example, you hydroplane during a storm and hit a tree, you will be responsible for repairs to your vehicle. Though your collision coverage will pick up the bill, but you will first need to pay the cost of your deductible toward the repairs. If the total cost is $4,000 and your deductible is $500, you will pay the $500, and the insurance company will pay the other $3,500.
Choosing a Deductible
Insurance companies offer many different deductibles – they can be as low as $100, or as high as $1,000 or more. Higher deductibles reduce the amount of risk the insurance company must take in offering you a policy. This allows them to offer lower premiums when you agree to pay more out of pocket for a claim.
It can be tempting to choose a higher deductible when selecting a policy since the lure of upfront savings on monthly premiums can be enticing. However, higher deductibles come at a risk. For example, insurers know that you are not only responsible for more of your repair costs, but you are also less likely to file a claim for an accident altogether. This is because your repair costs must meet your high deductible before you can ask your insurance company to pay a cent toward the claim.
You might also assume that you could save up enough to cover a $1,000 deductible several months or years down the road, but what about now? Before selecting a deductible, you must first know whether you could reasonably afford to pay it right away should an accident occur the very next day. It’s easy to think about the future, but insurance is about protection in the short-term, too.
What’s Right for You?
At the end of the day, there is no way to know for sure which deductible is right for you because there is no way to determine what the future may hold. Of course, if you knew you would be in an accident tomorrow, you would choose the lowest possible out-of-pocket expenses. This would offer the greatest peace of mind with the least possible interference in your personal budget.
The question is, what is most important to you – peace of mind or upfront savings? After all, a lower deductible means not having to stress over the cost of a potential repair bill. On the other hand, a higher deductible could offer slightly lower premiums. Just don’t assume that several years of accident-free driving means you will continue to enjoy a collision-free record. Accidents can happen to anyone – including the safest of drivers.
Here at Wheaton Insurance, we help Forest and surrounding area drivers Lake drivers better understand the details of their insurance policies and explain local options for coverage here in Minnesota. To find out more about car insurance deductibles or request your own Forest Lake car insurance quote, contact our office today. We look forward to serving you soon.